The Bank of Canada on Wednesday decided to keep its overnight rate target at 1 percent. The central bank made a less-dovish hint as it dropped the word “neutral” from its BC Rate Statement. Meanwhile, Statistics Canada said Retail Sales posted its second monthly decline following six monthly advances. Retail sales and its core reading both slipped 0.3 percent in August, with 7 of the 11 subsectors posting sales declines. Consumer Price Index and its core reading both nudged up 0.1 percent.
The latest EU-wide bank stress test conducted by the European Banking Authority (EBA) and led by the ECB revealed 25 out of 123 banks, including Banca Monte dei Paschi di Siena SpA of Italy, failed the test. Nearly half of banks that failed were reportedly required to increase capital. The stress test is done to assess “resilience of EU banks to adverse economic developments, so as to understand remaining vulnerabilities, complete the repair of the EU banking sector and increase confidence.”
Recent Trade Balance data revealed in New Zealand and Japan showed deficits of both countries advanced. New Zealand more than doubled its trade deficit to –NZD1,350 million,, while Japan posted –JPY1.07 trillion.
China’s GDP and Industrial Production improved more than anticipated (7.3 percent and 8 percent, respectively).
In the United States, Jobless Claims grew to 283,000 in the prior week. This was higher than expectations and the previous week’s reading.
Gold has just printed a clearer-looking triple bottom this week after posting a bullish outside bar on Wednesday. Bears are now more at risk; hence, they must try to breach the $1,300 level as soon as possible. More problems are up ahead until $1,400.
Oil posted its fourth consecutive weekly decline. Unlike the past three weeks, though, Oil made a less-considerable downside move this time, traded a much-tighter $3 range, and stayed afloat above $81 upon the weekly close. Expect sellers around $84-$85 this time.
EURUSD reversed the previous week’s gains as the 1.2800 area capped the pair while 1.2700 failed to gain support from bulls. Price is now below 1.2700, the midpoint of the current short-term potential range between 1.2500 and 1.2900. Potential divergence could play out if price recedes again, and we could see some bulls buy at discount prices.
GBPUSD traded in a relatively tighter range this week as bulls try to hamper another bear assault at the 1.6000 psychological level. Bulls need a strong weekly close above 1.6200 this time. Plenty of resistance remain at 1.6300-1.6500.
USDJPY bulls were supportive this week as they helped reverse the losses posted in the prior week. Now that 108 has been taken out, they should try to maintain their composure and keep this level well protected. If successful, they can attack the upper 109s again.
The Week Ahead
Starting Sunday (October 26), clocks will be moved backward by 1 hour to implement DST (Daylight Savings Time shift) exit in Switzerland, most European countries, and the United Kingdom.
This Monday, New Zealand will celebrate Labor Day. Economic data release will start in the European session with Germany’s Ifo Business Climate; Eurozone M3 Money Supply; UK’s CBI Realized Sales; and US Pending Home Sales.
On Tuesday, there will only be a few economic releases such as Japan’s Retail Sales; US CB Consumer Confidence, Durable goods Orders, and S&P/CS Composite-20 HPI.
Wednesday will start with Japan’s Preliminary Industrial Production, and then followed by New Zealand’s ANZ Business Confidence; UK net Lending to Individuals; Canada’s IPPI and RMPI; US FOMC Statement and Federal Funds Rate will follow this.
Economic data release for a very busy Thursday will start very early with New Zealand’s RBNZ Interest Rate Announcement and Statement. This will be followed by Australia’s Import Prices; UK Nationwide HPI Germany Prelim CPI; Switzerland’s KOF Economic Barometer; Spain’s Flash GDP; Germany’s Unemployment Change; US Advance GDP, Jobless Claims, and Fed Yellen’s speech.
A busy Friday will cap off the week starting with New Zealand’s Building Consents. This will be followed shortly by Japan’s Household Spending, Jobless Rate, Tokyo Core CPI, BOJ Monetary Policy Statement, BOJ Outlook Report, and Press Conference; Australia’s PPI; Germany’s Retail Sales; France’s Consumer Spending; Eurozone CPI Flash Estimate and Jobless Rate; Canada’s GDP; and US Employment Cost Index, Personal Spending, Chicago PMI, and Revised UoM Consumer Sentiment.